IT'S OFFICIAL: Apple Has Lost Its Edge

Many factors have contributed to that drop. But none is more
important than this:

Apple has lost its edge.

What does that mean?

It means that Apple is no longer the clear product leader in
several categories in which it has dominated the world in the
past five years.

Now, of course, Apple is still the most valuable and profitable
company in the world. And its product design, manufacturing, and
distribution are still remarkable. And it's still a great company
that makes great products (I, for one, am a very happy Apple
customer*). So, let's be specific.

For most of the past five years, Apple has led the world in the
following key areas. In the past couple of years, however, Apple
has lost its lead. And in some areas, it has actually fallen
behind:

Smartphones. Apple reinvented the smartphone
category with the launch of the iPhone in 2007. For the first five years of
its existence, the iPhone was unequivocally the best smartphone
on the market. Now,
many people consider other new smartphones to be better than
the iPhone 5, including Google's new Nexus phone and
Samsung's Galaxy S3. And with Samsung set to release the Galaxy S4 soon,
many fear that Apple will fall even farther behind.

Consumer
Reports

Tablets. Apple straight-up invented the tablet category. The
iPad had the market to itself for the
first couple of years. The iPad is still by far the industry
leader in big tablets, but Apple was late to the market for
smaller tablets. As a result, the company lost valuable time
and market share in that category. And, in an attempt to
preserve its profit margin, Apple made some compromises on
the Mini (namely, the lower-resolution screen) that left many
Apple fans disappointed.

Pricing. When the iPhone and iPads came out,
Apple led the world in both features AND price. This was
remarkable: Apple had the best product AND the best price. The
iPhone is still priced at parity with the other top
smartphones, but Apple has surrendered the mass smartphone
market in emerging markets (where the big growth is) to
companies like Samsung. Also, Apple's new tablet, the iPad
Mini, is now considerably more expensive than many other
tablets in its category. So Apple is no longer the feature and
price leader in this market.(Several
reports suggest that Apple will launch a cheap iPhone this
year, which is a smart move.)

Gadget market share. If one credits Apple with
defining a whole new category of smartphone with the iPhone,
Apple had dominant share of the category for a couple of years.
Same with tablets. In the last two years, however, in part
because of Apple's decision to focus only on the "premium"
segment of the market, Apple's global market share in both
categories has dropped precipitously. If this were merely a
"gadget" market, this wouldn't matter. Apple has enough scale
that additional market share would not make a huge difference
in economies of scale. But the gadget market is now also a
platform market (other companies build products and services on
top of gadgets). And in platform markets, market share matters
a lot.

Cloud-based services and apps. By owning the
App Store and the most commonly used apps on smartphones and
tablets--cloud-based storage, email, telephone, voicemail,
clocks, calendars, etc.--Apple once basically had end to end
control over the cloud software and services ecosystem. With
the "Maps" screwup last summer, along with a slow pace of
innovation in its own "anchor apps" and cloud-based services,
Apple has given up ground to Google, Dropbox, Evernote, and many other aggressive, focused
companies that have produced apps and services that are better
than Apple's native apps and services. The more people use
non-Apple apps and services, the less important Apple's gadgets
become as a platform (if you can easily migrate all your apps
and services and content to another platform, there's less
reason to stick with Apple.)

In all of these areas, Apple has lost a once-dominant edge.

In the last year, we have also seen Apple stumble with respect to
a widely expected new product--a new Apple TV.
This product was initially expected to be announced last fall,
and some of the excitement that drove Apple to $700 a share was
anticipation about this release (most of it was anticipation
about the iPhone 5).

But now, analysts don't expect to see an Apple TV until the fall
of 2013. And in the meantime, every other electronics company on
earth is trying to frontrun Apple's TV effort, including Samsung.
These efforts will make it harder for Apple to leapfrog existing
TVs--and charge a premium price--when Apple's own TV finally
comes out.

(Apple fans will protest that Apple never announced a release
date for the TV product, or even announced what it will be.
That's certainly fair. But time does matter. Competitors aren't
standing still. What would have been a startlingly cool TV last
fall--"a sheet of glass floating in mid-air" and "a
voice-operated show selector"--has
now been debuted by Samsung. So the bar for Apple to
establish a true edge in this market keeps going up.)

It is hard for even the best companies to maintain an edge,
especially in markets that move as fast as technology. And Apple
rode its edge to amazing heights: The iPhone is still the biggest
and most profitable single product in the world.

But Apple has now lost much of its edge. So the next few years
will be interesting. Especially as Apple truly moves into the
"post-Steve Jobs era," which it is finally doing this year.

*NOTE: Some readers have emailed me to ask
whether I wrote this article because I am a Samsung-Android fan.
I like the Samsung Galaxy S3 and I own two Samsung TVs (and love
them). But my phone is an Apple iPhone 5, my laptop is an Apple
Air, and we have an Apple iPad at home. I love these products. I
also love Apple's customer service. As I said above, I am a very
happy Apple customer, and I think Apple is a great company. But I
still think the company has lost its edge.